Wednesday, October 30, 2013

It’s not difficult to see that some Americans make poor financial
decisions. We’ve been bombarded with reports of the so-called sub-prime
mortgage credit crisis--mostly because borrowers didn’t fully understand what
they were getting into and the possible consequences. Depending where you are,
you see ads for “car title loans,” Payday loans, and “refund advance loans” on
your anticipated income tax refund. All of these incur, on an annual basis,
astronomical interest rates, but are sold as putting cash in your pocket for
“just a few dollars.” What about the person who accepts paying a $2.50 fee to
withdraw $10 from an ATM once a week?

This situation has attracted the attention of
high levels in our government. The Federal Reserve Bank of Kansas City has
highlighted both the need for and the benefits of financial education conducted
in the workplace. President Bush has recently formed an Advisory Council on
Financial Literacy, appointing Janet Parker, SPHR, to the Council. Appointing
the chair of SHRM to the Council clearly signals that theHRprofession
belongs in this national discussion. What is consistently seen as a tool to
address the financial illiteracy concern is some sort of Financial Education in
the Workplace.

Indeed, if financial education in the workplace
is a part of the solution to this problem, HR professionals, as the stewards of
employee education, will be in the forefront of the effort. Whether expressed
as “financial literacy,” “financial education,” “financial stabilization,” or a
catchy, easily-turned-into-an-acronym name (such as “Consolidated Approach
Simplifying Handling Money, or “CASH Money”), employers on the leading edge of
addressing this issue will become employers of choice.

What does your organization’s program look like?
Is it truly literacy? Merely “education”? Voluntary brown-bag lunch-and-learn
sessions? The minimum required by law (e.g., ERISA)? If this has been your
program for a long time, and your employees are still in financial straits from
poor decisions because today’s financial world is much more complicated than it
was 10 or 20 years ago, don’t you think you need a change? After all, as the
joke goes, doing the same thing over and over expecting a different outcome is
akin to insanity.

So what does work? Let’s look at an allegory
that you probably already have in place--your “health and wellness program.” It
usually consists of health education, building an exercise plan, stopping
smoking programs, and providing atimeand place to exercise, sometimes at
the workplace, sometimes a reduced membership fee at the gym. Change some of
those words around and you have a financial wellness program: providing
financial education, building a budget, stopping over-spending programs, and
providing the access to real-world experts who can make the “financial
exercise” actually pay off. As can be said, “learning about aerobics, studying
the physiology of exercise, and knowing you should go to the gym” does not make
one physically fit. You have to actually do the dieting, aerobics, workouts,
that is, one must change one’s behavior to make it work.

The same is true for financial wellness. “Brown-bag seminars” alone will
not get your employees on track with managing their financial affairs. It’s
getting them to change financial behavior that does it. Sometimes it’s
necessary to set up the conditions for your employees to get smarter and to
change (for the better) what they do with their money. Setting them up for
financial success can be as important to your organization as setting them up
for professional success.

“Sure, but what’s in it for the organization?”
Great question. If there’s a payoff, it makes even more sense to do it. Thebottom linematters greatly. So, let’s turn the
question around a bit. Is it worth something real to the organization if:

• Your payroll administrators have fewer
garnishments and other legal actions to process?• Your retention improves because employees
return theloyaltyshown “down” from management in
helping them to take care of difficult matters?• Your employees’ participation in
tax-advantaged retirement plans (such as 401(k) plans) increases?• Absenteeism is reduced, because your employees
feel stronger loyalty and (surprisingly) are healthier?•Employeetheft (“shrinkage”) is reduced because
of the improved loyalty?• Overallproductivityimproves because employees are at
theirjobsmore, instead of missing work to
handle legal issues, for example?• Overall productivity improves because
employees are more focused on their work, instead of worrying about their
financial woes?

The following two hyperlinks bring you to
results from research conducted byindependent researchers and The Federal Reserve
Bank of Kansas City. Is there any reason to believe that your organization would
be that much different from those in the research? Would you like to be known
as an employer of choice because of all the personal, valuable, financial
literacy you give to your employees, or just another organization who does only
the mandatory one-hour lecture on the retirement plan?

Notice that this whole concept is independent of
whether employees are exempt or non-exempt, professional, technical, skilled,
or unskilled. Certainly, there is more for the organization in ascertaining ifparticipantsin the financial literacybenefitare likely to be retained--but success
in the program can be abigmotivator for those considering
leaving the organization. It’s also independent of income
level--six-figure-income employees can and do make poor financial decisions as
well as entry-level ones, and often with bigger dollar consequences.

The research is done, and there’s plenty of
it--improving the financial literacy of employees brings tangible benefit to
both employers and employees. Why not do it in the workplace, where the link
between the employer’s goals and the individual employee’s goals merge. The
cutting edge is there. Will you help take your organization there?

Richard L. Virgilio, SPHR, is a retired Navy submarine
Captain, a former study leader and analyst for The Johns Hopkins University
Applied Physics Laboratory, and independent HR consultant. (rlvirgilioga@yahoo.com
)